The price of oil has jumped by about 1%, and is preparing to record the largest weekly increase in two months amid ongoing tensions in the Middle East following the Houthi attacks in the Red Sea.
More maritime carriers are avoiding the Red Sea due to vessel attacks, causing global trade disruptions through the Suez Canal, which handles about 12% of worldwide trade. Meanwhile, freight rates have soared as more ships take extensive detours. So far this week, only about 30 tankers have entered the Bab al-Mandab Strait at the southern end of the Red Sea, according to vessel-tracking data. The U.S. on Tuesday launched a multinational operation to safeguard commerce in the Red Sea, but the Houthis said they would continue to carry on attacks.
The negative dynamics of the US currency also supports oil. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.10% to 101.76. Since the beginning of the week, the index has fallen by 0.78%.
However, oil is preparing to record its first annual drop since 2020, as increased oil production in the United States and other countries offset production cuts by OPEC+ members. In addition, the International Energy Agency trimmed its forecast for oil demand growth in 2023 by 90,000 bpd to 2.3 million bpd. China accounts for 80% of this year's global rise. A halving in the rate of demand expansion next year is due to below-trend economic growth in major economies, efficiency improvements and a booming electric vehicle fleet, the IEA said.